How to Get a Loan With Bad Credit in 2024 [& How to Spot a Scam]

According to the FICO scale, any score below 670 is considered a bad credit score. When your score is this low, getting a new loan can be quite tricky, but not impossible. So do not despair, because in this guide we will explain how to get a loan with bad credit.

Other than that, we will cover some other related points, including lending options with a poor credit score, how to recognize scams, and how to improve your FICO score.

How to Get a Loan With Bad Credit?

Take a look at the steps you have to take if you plan on obtaining a loan with a bad credit score. After you go through these steps it wouldn’t hurt to check these lenders that offer bad credit personal loans.

Check Your Credit Score

Before you even apply, you need to find out just how bad the situation really is. To do that, you need to get your credit report, which you can do online, from all three of the major credit bureaus. If your FICO score reads lower than 670, your credit score is considered bad.

Guarantee You Can Repay the Loan

If you are looking for ways to get a loan with bad credit, you need to examine your income carefully and estimate what loan you can afford. You don’t want to end up biting off more than you can chew.

Compare Bad Credit Loans

While most bad credit loans include stricter loan terms, there are two types:

Secured Loans

These loans are the ones guaranteed by a valuable possession such as a car or a house.

Unsecured Loans

These loans are not guaranteed by any equity, and there is no possibility of repossession. They include mortgages, credit cards, and student loans.

Check Prequalification Possibilities

One of the ways to find out if getting a loan with bad credit is even a possibility for you are online lenders. Many of these platforms offer you a free loan calculator that also helps you check if you qualify for a loan. This is a good way to check the lenders’ eligibility requirements without going through a hard credit check. Basically, you can see if you prequalify for a personal loan with bad credit before you actually apply.

Add a Co-signer if Needed

Sometimes you need help getting a loan. In this case, having a co-signer on your loan might be a good idea. A person co-signing your loan can even benefit your overall credit score if they have a good credit history.

Gather Financial Documents

Check what documents you need. These may include stubs, payslips, salary certificates, etc. Having all these ready in advance may speed up the whole process significantly.

Get Ready for a Hard Credit Check

Many lenders may resort to a hard credit check in cases of bad credit loans, and while it may slightly hurt your credit score, you will be able to retrieve it, and even improve it in the long run, provided there are no late payments.

What Are My Bad Credit Lending Options?

So, after considering your situation carefully, you decide to get a loan despite your bad credit score. Now you are probably wondering, how to get a personal loan with bad credit? Well, here are some of the financing options for you to consider:

Your Current Bank

Probably your go-to place if your major concern is getting a small loan. Already familiar with your history, your bank may be willing to approve a small, short-term loan. Contact your bank and inquire about their policies.

Peer-to-Peer Lending

This can be the best way to get a loan with bad credit, but it comes with a very high-interest rate (over 30%). The rates are limited, however, and these loans do not require any collateral.

Payday Loans

Payday loans are a lifeline for many people because they offer quick cash with no credit check. However, the interest rate can get ridiculously high, and the debt is deducted straight from your bank account. Definitely not a recommended lending option.

Credit-Builder Loans

This is more of a long-term plan. Your loan amounts would be set aside on a savings account, and you would access them in full only after you have paid all the installments. It’s a good option if you are trying to start or reestablish your credit history.

Credit Cards

There are actually quite a few credit cards you can still acquire, even if your credit score is bad. Needless to say, these cards come with limited benefits and often higher interest rates. If you are having trouble repaying old credit card debts, you may need to look at what the top credit card consolidation loans can offer you.

Lines of Credit

Lines of credit or HELOCs are another answer to all of those wondering how to qualify for a loan with bad credit. HELOCs are an equity-based type of financing, where you use your house or another piece of real estate you own as collateral. After your line of credit is granted, you can get the amount you need, and repay it in installments, with a certain interest.

How to Recognize Bad Credit Loan Scams?

Just like with every plan involving money, the bad credit loans sphere is fertile ground for all sorts of scams. In order for you to know how to get a loan with a poor credit score without being cheated, here are some dead giveaways that you’re dealing with a scammer:

Require Prepayment

It is perfectly normal for your lender to charge you for administrative costs, but these are usually deducted from your loan. If your lending services provider asks you for any cash or payment up front, they are not legit. As simple as that.

Require Unusual Payments or Payment off-the-Books

Make sure that every single installment you make is registered officially. A legitimate lender will never take your money without issuing a receipt.

Guarantee Approval Without a Credit Check

By now you probably know how hard it is to get a personal loan with a bad credit score. So, if your potential lender does not care about your credit history, this is usually one of the tell-tale signs of a scammer.

Send You Unsolicited Offers

If you get an offer that you did not ask for, that very often sounds too good to be true, you may have run into a fraudster. All loan offers are given upon request, and with clearly stated conditions.

Poor Advertising Methods

Keep an eye on your lender’s social media accounts. Reputable financing companies usually have enough budget for proper advertising. If you see low-budget ads, run like the wind.

Unsecured Websites

The ‘s’ in the https protocol stands for secured, and it’s a sign that a company takes care of its clients’ internet safety. 

No Physical Address

This is one of the typical signs of a scamming scheme. A company, especially one dealing with financing, usually discloses its physical address clearly. If you are having any doubts regarding this issue, always double-check.

How to Improve Your Credit Score for a Bad Credit Loan?

Even if you’re just getting a bank loan with bad credit, you should still consider improving your credit score a bit. It will make you seem like a more creditworthy borrower, and it will be a good step for your credit future. Here are a few tips:

Payment History

One of the first things your prospective creditors will run a credit check on, is your payment history. Here you need to make sure that you don’t have any unsettled debts, and that all your payment information is correct.

Use of Credit

How you used your credit in the past is also a very important factor. Make sure that it is clearly visible what you need the loan for, and that your spending corresponds to the purpose of the loan.

Length of Credit History

The more credit you use, the longer your credit history is. Crediting companies prefer clients with a long (and responsible) credit history. Make sure there are as few blemishes as possible in your credit history (such as maxed-out credit cards, etc.)

Credit Types and Combinations

Make sure that you have examined all the options. Don’t throw in your towel just because your local banks refused you. Check out some online lenders or credit unions.

Recent Credit

Make sure that your most recent lendings are under control, as much as they can be. Creditors are going to run a hard check on you, and your most recent loans and debts are going to be one of the first things they look at. If you have shown a trend towards settling your debts, it may benefit your case greatly.

Conclusion

Finally, even if your credit score is bad, there is no need to despair or file for bankruptcy just yet. There is a wide range of possibilities for anyone who needs a little extra cash, including those with bad credit. If you’re looking to fix your bad credit, check Credit Saint’s services.

Always try to run a prequalification check online to see what bad credit loan options suit you best, and start gathering those documents.